Bredband2: Continues to impress on costs - ABG

Earlier-than-expected cost synergies led to 4% EBITA beat
We lift '24e-'26e EBITA by 3-4% on lower opex
11x '24e EV/EBITA, we estimate 17% EBITA growth in '24


Surprisingly strong customer intake

Bredband2 has a good track record of reaping early cost synergies after doing M&A, and Q1 was no exception with opex coming in lower than expected after the acquisition of Stockholm Stadsnät was consolidated on 1 February. As sales were in line, this led to a 4% EBITA beat vs. ABGSCe, with EBITA +29% y-o-y. We estimate that organic growth was +6% y-o-y, and assess that the company's recent efforts to enhance organic customer intake garnered fruitful outcomes in Q1 (+4,000 organic customers q-o-q vs. ABGSCe +1,700). The latter was driven by increased marketing campaigns (lowered list prices), which also hurt the gross margin (34.0%, down from 35.1% in Q4). That said, our price tracker suggests that Bredband2 has commenced price hikes from the beginning of Q2, and we expect these to gradually benefit organic growth and gross margins over the coming quarters. We believe that the price hikes are partly to mitigate increased network costs, which should therefore only impact its churn modestly. Even so, we choose not to extrapolate the strong customer intake in Q1 into our forecasts, as it is too early to call it a trend.